Yuehua Telecom Inc. and Guangxin Technology Ltd. are two competing ICT corporations based in Shenzhen Special Economic Zone, China. Both companies’ stocks are traded at Shenzhen Stock Exchange. The comparative financial statements of Yuehua and Guangxin for the last four years (2016 – 2019) are shown in the Attachments 1 and 2: Instructions: 1. (A) Calculate the following ratios for each corporation for 2017, 2018, and 2019. Current ratioSales to total assets ratioReturn on total assets ratioReturn on shareholders’ equity ratioGross profit ratioNet profit ratioDebt to equity ratioEarnings per sharePrice/earnings ratio (B) Evaluate each company’s trends for sales, gross profit, and net income as disclosed on the comparative income statement. 2. What is your evaluation of the following? The liquidity of each corporation.Profitability.The financial structure of each corporation.The stock market’s perceptions of these companies. 3. Which corporation do you think would be a better investment if you were planning to purchase common shares? Why? Note:There are two attachments are attached velow.Attachment 1: Comparative Statement of Financial PositionAttachment 2: Comparative income statement Attachment 2: Comparative Income StatementComparative Income StatementYuehua Telecom Inc. and Guangxin Technology Ltd.For the Years Ended at December 31: 2016, 2017, 2018, 2019(Currency Unit in Million Chinese Yuan, ¥1,000,000)Yuehua Telecom Inc.Guangxin Technology Ltd.20192018201720162019201820172016¥33075¥528¥320SalesCost of Goods SoldGross ProfitOperating ExpensesIncome from OperationsInterest ExpenseIncome (Loss) before Income TaxesIncome Taxes [(Recovered)]Net Income (Loss)¥600¥540¥516¥330¥27046043042041010510090140110108106225145220180565050508510510096868460585614040601201470606060605829605680(20)[(10)]半10)24353028403012¥35¥30羊29半28¥40¥30羊12Dividends DeclaredPreferred¥10¥10¥10¥10¥20¥0¥10¥10Common¥12¥10¥10¥10¥15¥0¥10¥10Market Price Per Common Share¥1,250¥1,000¥950¥900¥800¥200¥1,200¥100(In Single-Unit Chinese Yuan, Not in Million)* According to the tax law of Shenzhen Special Economic Zone, a 'strategic' ITC company that suffered a loss in a fiscal year can ask for arefund of 50% (i.e., corporate tax rate) of the loss amount from the tax paid in previous fiscal year. So [(10)]' means Guangxin got a ¥10million refund of tax from government. Thus, the net loss for Guangxin for 2018 is:- 20 - (- 10) = - 20 + 10 = - 10. Attachment 1: Comparative Statement of Financial PositionComparative Statement of Financial PositionYuehua Telecom Inc. and Guangxin Technology Ltd.At December 31 of the Years 2016, 2017, 2018, and 2019(Currency Unit in Million Chinese Yuan, ¥1,000,000)Xuehua Telecom Inc.Guangxin Technology Ltd.20192018201720162019201820172016AssetsCurrent Assets¥185¥165¥155¥140¥480¥450¥410¥381Non-current Assets, at Carrying AmountTotal Assets535397392378¥518599603572¥982601¥720¥562¥547¥1,079¥1,053¥982LiabilitiesCurrent LiabilitiesBonds Payable¥160¥135¥130¥110¥272¥251¥170¥18012% Due in 10 Years12015% Due in 7 Years400400400570400Total Liabilities280135130110672651580Shareholders' EquityShare CapitalPreferred: 200,000 shares eachCommon200200200200200200200200Yuehua: 100,000 sharesGuangxin: 50,000 shares10010010010050505050Retained EarningsTotal Equity140127117108157152162152440427417408407402412402Total Liabilities and Equity¥720¥562¥547¥518¥1,079¥1.053¥982¥982

Ratio analysis: This is the quantitative analysis of financial statements of a business enterprise.…

Yuehua Telecom Inc. and Guangxin Technology Ltd. are two competing ICT corporations based in Shenzhen Special Economic Zone, China. Both companies’ stocks are traded at Shenzhen Stock Exchange. The comparative financial statements of Yuehua and Guangxin for the last four years (2016 – 2019) are shown in the Attachments 1 and 2: Instructions: 1. (A) Calculate the following ratios for each corporation for 2017, 2018, and 2019. Current ratio Sales to total assets ratio Return on total assets ratio Return on shareholders’ equity ratio Gross profit ratio Net profit ratio Debt to equity ratio Earnings per share Price/earnings ratio (B) Evaluate each company’s trends for sales, gross profit, and net income as disclosed on the comparative income statement. 2. What is your evaluation of the following? The liquidity of each corporation. Profitability. The financial structure of each corporation. The stock market’s perceptions of these companies. 3. Which corporation do you think would be a better investment if you were planning to purchase common shares? Why? Note: There are two attachments are attached velow. Attachment 1: Comparative Statement of Financial Position Attachment 2: Comparative income statement

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Yuehua Telecom Inc. and Guangxin Technology Ltd. are two competing ICT corporations based in Shenzhen Special Economic Zone, China. Both companies’ stocks are traded at Shenzhen Stock Exchange. The comparative financial statements of Yuehua and Guangxin for the last four years (2016 – 2019) are shown in the Attachments 1 and 2:

Instructions:

1. (A) Calculate the following ratios for each corporation for 2017, 2018, and 2019.

Current ratio
Sales to total assets ratio
Return on total assets ratio
Return on shareholders’ equity ratio
Gross profit ratio
Net profit ratio
Debt to equity ratio
Earnings per share
Price/earnings ratio

(B) Evaluate each company’s trends for sales, gross profit, and net income as disclosed on the comparative income statement.

2. What is your evaluation of the following?

The liquidity of each corporation.
Profitability.
The financial structure of each corporation.
The stock market’s perceptions of these companies.

3. Which corporation do you think would be a better investment if you were planning to purchase common shares? Why?

Note:

There are two attachments are attached velow.

Attachment 1: Comparative Statement of Financial Position

Attachment 2: Comparative income statement

Attachment 1: Comparative Statement of Financial Position
Comparative Statement of Financial Position
Yuehua Telecom Inc. and Guangxin Technology Ltd.
At December 31 of the Years 2016, 2017, 2018, and 2019
(Currency Unit in Million Chinese Yuan, ¥1,000,000)
Xuehua Telecom Inc.
Guangxin Technology Ltd.
2019
2018
2017
2016
2019
2018
2017
2016
Assets
Current Assets
¥185
¥165
¥155
¥140
¥480
¥450
¥410
¥381
Non-current Assets, at Carrying Amount
Total Assets
535
397
392
378
¥518
599
603
572
¥982
601
¥720
¥562
¥547
¥1,079
¥1,053
¥982
Liabilities
Current Liabilities
Bonds Payable
¥160
¥135
¥130
¥110
¥272
¥251
¥170
¥180
12% Due in 10 Years
120
15% Due in 7 Years
400
400
400
570
400
Total Liabilities
280
135
130
110
672
651
580
Shareholders' Equity
Share Capital
Preferred: 200,000 shares each
Common
200
200
200
200
200
200
200
200
Yuehua: 100,000 shares
Guangxin: 50,000 shares
100
100
100
100
50
50
50
50
Retained Earnings
Total Equity
140
127
117
108
157
152
162
152
440
427
417
408
407
402
412
402
Total Liabilities and Equity
¥720
¥562
¥547
¥518
¥1,079
¥1.053
¥982
¥982

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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